PPO Offerings to Plummet on 2016 Exchanges
Because consumers are more sensitive to price than to provider choice, payers are dropping preferred provider option plans in big numbers. They find it is more financially advantageous to offer plans that are based on narrow networks.
As insurance companies keep looking for ways to rein in their members’ healthcare spending, the shift away from broad provider networks and out-of-network benefits is on.
Two-thirds of payers that sold preferred provider organization health plans through the exchanges in 2015 are either reducing or eliminating their PPO offerings in 2016, according to a new analysis from Katherine Hempstead, PhD, director of coverage issues at the Robert Wood Johnson Foundation in Princeton, NJ.
Carriers Limit Network to Control Costs
Through her research, Hempstead found that 93 carriers offered PPO plans in 48 states, resulting in 131 unique carrier-state combinations in in 2015. Just 43 carrier-state PPO combinations remain for 2016. Additionally, in 22 states, all silver-tier PPO plans offered in 2015 have been either reduced or eliminated for 2016.
Insurers are dropping PPO plans in big numbers, Hempstead says, because it is more financially advantageous to offer plans that are based on narrow networks.
“The carriers said they lost a lot of money on PPO plans, in particular the broader network plans that allow the use of out-of-network providers. It’s that access to out-of-network providers that drove costs in these PPO plans,” she says.
Cost Trumps Choice
Because consumers are more sensitive to price than to provider choice, Hempstead says, payers are more apt to limit the network than they are to raise prices.
Buyers consistently cite copays, deductibles, and out-of-pocket expenses as the top areas of concern when shopping for insurance, she says.
“Everything is about money. Pretty far down the list is the providers they will have access to. That is something consumers are willing to trade on. One reason why carriers want to reduce or eliminate PPO plans is because they can raise premiums to a certain extent, but customers are very price conscious. So carriers have to reduce the cost of services by getting rid of broader network plans and eliminating out-of-network utilization,” she says.
“Overall, assuming there is no free lunch and carriers have to do something to contain costs, consumers, as a group, would rather make that trade-off around access to out-of-network providers.”
Payers can then control costs by “driving a hard bargain with the providers who are in their networks” when it comes to negotiating reimbursement contracts, Hempstead adds. And as more payers move away from PPO plans, it will become difficult for providers to resist entering into in-network agreements.
“Providers are taking on some risk and maybe are being given a PMPM [per-member, per-month] in addition to a shared-savings payment. They may be accepting lower rates based on increased volume. But my sense is it is going to get harder and harder to make an out-of-network provider practice work for physicians,” she says.
Better Service, More Information Needed
Although cost-conscious consumers are opting for lower-cost plans with narrower networks and fewer benefits, insurance companies will still need to raise their game when it comes to providing information and customer services—two areas where many payers are sorely lacking, Hempstead says.
“It will put a healthy pressure on carriers to create ways for consumers to access information about the quality of physicians and to help them shop for a new physician. If [payers] are making it unaffordable to go out-of-network, it is going to raise the stakes around the healthcare providers consumers do have access to,” she says.
“Consumers are going to want to know how to pick a physician who is available at night or who treats women their age, for example. Even though this seems basic, these are things that are hard for consumers to find out. If tighter networks are going to be the reality, then consumers are going to have to get good information about those doctors that are in their new network.”
Carriers are also going to have to figure out how to provide a stronger customer service experience in order to prevent a backlash from members who are being pushed into narrow network plans.
“If you look at any other mature industry, you see a pitch to the consumer that is about the customer experience they are going to have. There are so many pain points in healthcare and so much bad customer service. If payers are going to control the network, they need to be creating a certain kind of patient experience,” Hempstead says.
Show Not Over Yet
Insurance companies are currently in the power position when it comes to designing health plans and negotiating contracts with providers Hempstead says. “Payers are very powerful and are dictating terms to providers. For all the talk of provider market power… I think payers are squeezing providers into these pretty tightly controlled arrangements.”
However, she expects providers to fight back and begin to develop models that give less control to payers and provide more choice to consumers, such as provider-owned health plans and concierge-style physician practices.
“The insurer is now planning utilization and planning how consumers are going to access care, but you could imagine another model where providers are doing more of that and insurance is more of a financial backstop to hold consumers harmless in the case of a major event,” Hempstead says.
“I don’t think this show is over yet. I don’t think providers are going to say, ‘We will just work for the carriers now.’ I think providers, at some point, are going to think of ways to offer an alternative to consumers.”
Originally posted on: Healthleadersmedia.com